2001 (2) TMI 999 - HC - VAT and Sales Tax

Court clarifies taxable event under APGST Act; lease rent receipts for pre-1985 inter-State sales not taxable

The court clarified that the taxable event under Section 5-E of the APGST Act is the 'transfer of the right to use any goods,' not the actual use of the ... - Issues Involved:1. Determination of the taxable event under Section 5-E of the APGST Act, 1957.2. Taxability of lease rent receipts for goods purchased outside Andhra Pradesh and leased within the state.3. Applicability of Section 5-E to transactions occurring before its enactment.4. Jurisdiction of the State to levy tax on inter-State and import transactions.5. Validity of the Commissioner's revision of the Appellate Deputy Commissioner's orders.Issue-wise Detailed Analysis:1. Determination of the taxable event under Section 5-E of the APGST Act, 1957:The primary issue was identifying the taxable event in the context of deemed sales as per Section 5-E of the APGST Act. The court clarified that the taxable event is the 'transfer of the right to use any goods' and not the actual use of the goods. This interpretation was supported by the statutory language of Section 5-E, which explicitly mentions the transfer of rights as the taxable event, excluding the actual usage of the goods from being a taxable event.2. Taxability of lease rent receipts for goods purchased outside Andhra Pradesh and leased within the state:The turnover in question represented lease rent receipts for goods purchased outside Andhra Pradesh and leased within the state before July 1, 1985. The assessing officer had subjected these receipts to tax under Section 5-E, but the Appellate Deputy Commissioner allowed the appeals, stating that the taxable event was the transfer of the right to use, which occurred outside the state. The court upheld this view, emphasizing that the transactions were inter-State deemed sales and hence not taxable under Section 5-E.3. Applicability of Section 5-E to transactions occurring before its enactment:The court noted that Section 5-E was inserted into the APGST Act effective from July 1, 1985. Since the transactions in question occurred before this date, the court held that Section 5-E could not be applied retrospectively. Thus, any deemed sale before the enactment of Section 5-E was outside the purview of this provision.4. Jurisdiction of the State to levy tax on inter-State and import transactions:The court referenced the Supreme Court's decision in 20th Century Finance Corpn. Ltd. v. State of Maharashtra, which struck down clause (b) of Section 5-E as ultra vires. It was held that the State Legislature could not levy sales tax on the transfer of the right to use goods if such deemed sale occurred outside the state, in the course of inter-State trade, or in the course of import or export. The transactions in question involved inter-State trade and import, thus falling outside the jurisdiction of the state to levy tax under Section 5-E.5. Validity of the Commissioner's revision of the Appellate Deputy Commissioner's orders:The Commissioner of Commercial Taxes had revised the orders of the Appellate Deputy Commissioner, asserting that the taxable event was continuous and based on the actual use of the goods within Andhra Pradesh. The court found this interpretation incorrect and unsustainable, as it contradicted the statutory provisions and judicial precedents. The court restored the orders of the Appellate Deputy Commissioner, setting aside the Commissioner's revisions.Conclusion:The court dismissed the tax revision cases filed by the department and allowed the special appeals. The orders of the Commissioner of Commercial Taxes were deemed illegal and unsustainable, and the Appellate Deputy Commissioner's orders were restored. The court reaffirmed that the taxable event under Section 5-E is the transfer of the right to use goods, not their actual use, and that inter-State and import transactions are outside the state's taxing jurisdiction under this provision.